In today’s briefing:
- (Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market
- HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way
- Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid
- HSI June 2024 Rebal – BYD Electronics (285) ADDed, Cogard Svcs (6098) DELETEd, and Capping Flows
- A Few Generative AI Takeaways From C1Q24 Earnings
- Red Dragon Awakening
- HSCEI June 2024 Rebal – Zijin Mining (2899) ADDed, Xinyi Solar (968) DELETEd
(Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market
- Tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
- Three new deals was discussed on Smartkarma this week: Malaysia Airports (MAHB MK), I’Rom Group (2372 JP) and S Line (9078 JP). ESR Group (1821 HK) also in the crosshairs.
- Key updates took place on: Huafa Property Services Group (982 HK), Kansai Super Market (9919 JP) , Great Eastern Holdings (GE SP) and L’Occitane (973 HK).
HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way
- The Hang Seng Tech Index is more widely-followed than many think, and it is reasonably concentrated, so outperformance and underperformance by big names means capping and re-capping.
- This time, those flows are worth about 8% of the index in terms of one-way flows. Meituan, Xiaomi, JD.com, Tencent and Kuaishou Tech DOWN. Li Auto back up.
- Those who have pre-positioned on the big buy have recently gotten hurt. There are some FAF changes which are less predictable and may be interesting.
Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid
- A “Privatisation via a Merger by Absorption” is nothing new in Hong Kong. But the Offer consideration for Yichang HEC (1558 HK)‘s minorities is in unlisted scrip – that’s new.
- The Offeror holds 51.41% in Yichang HEC. Founder Guo Meilan and her son Zhang Yushuai control 62.12% of the Offeror. Yichang HEC shareholders are being offered 0.263614 “Offeror H shares”.
- These consideration shares are unlisted. An independent valuer backs out an implied scrip value of HK$18.12-HK$20.60/share. This is a super complicated, overwrought deal. With numerous unknowns. I’d vote this down.
HSI June 2024 Rebal – BYD Electronics (285) ADDed, Cogard Svcs (6098) DELETEd, and Capping Flows
- The Hang Seng Index benchmark has been expected to see an increase in names and flows to Healthcare. We have only one ADD (IT/tech) and one DELETE.
- But the headlined DELETE candidate in the most recent Quiddity Leaderboard was chosen to be deleted. And the ADD one of our top two.
- Flows are somewhat restrained at capping flows, small name change flows, and then a few FFW/FAF changes to be about 1.9% one-way flows in total.
A Few Generative AI Takeaways From C1Q24 Earnings
- The key takeaway from this earning season on the topic of generative AI (GAI) is that in-house generated content has the greatest potential for cost savings;
- Taking a step further, mid-sized video platforms can also use AI to skip the curator layer, similar to Pinduoduo using algorithm to bypass small merchants to connect directly to factories;
- We also notice that general media platforms with ample advertising inventories tend to perform better with AI’s help, which is why ads of Tencent’s advertising performed better than Baidu’s.
Red Dragon Awakening
- China momentum continues with KWEB breaking out above WEEKLY double-bottom base
- Stocks REPORTING this week that look technically sound include PDD BZ and EH
- In-Depth look at individual leaders in Tencent Holdings, Futu Holdings, and Sony Group
HSCEI June 2024 Rebal – Zijin Mining (2899) ADDed, Xinyi Solar (968) DELETEd
- The HSCEI is well-known and well-followed but sees less passive tracking than you might expect. Quiddity teammember Janaghan had expected up to two ADDs and two DELETEs.
- We got one ADD and one DELETE instead as SenseTime Group (20 HK) was “saved” from deletion by a FFW/FAF increase.
- Relatively smaller flows here at 3% one-way with the big flows on the name changes.
💡 Before it’s here, it’s on Smartkarma
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